Curious about how the pros determine whether a stock is a bargain or a blunder? Understanding stock valuation is key to making savvy investment decisions. 

Valuation helps investors determine a stock's worth beyond its current market price. This understanding guides investment choices, helping to manage risks and gauge an investment's performance. It ensures smarter decision-making, fairer business deals, and better resource handling, leading to more stable and profitable investments.

Brought to you by NIWS, the esteemed stock market institute in Delhi, Jaipur, and Indore, this blog unpacks the critical role of stock valuation in investment decisions. At NIWS, we pride ourselves on educating students and avid traders with top-tier financial insights. Read on to deepen your understanding and enhance your skills in making well-informed investment choices.

 

Benefits of Valuation in Investment Decisions 

Let's discuss some of the benefits of valuation in investment decisions-

1 - Informed Investment Decisions

Accurate information about the valuation helps the investor make an informed decision. Through meticulous analysis, investors can identify opportunities that align with their objectives. It allows investors to avoid paying more than the asset's actual value.

 

2 - Risk Management

Since valuation is done after careful analysis of every aspect of the asset, it helps investors to mitigate the risks. Through valuation, it is easier to identify the potential returns associated with the risks.

Valuation ensures that the risks associated with the investment are paid off. This disciplined approach ensures that potential rewards justify the risks assumed, fostering a sensible investment strategy.

3 - Portfolio Management

Valuation is the key to maintaining a balanced and diversified portfolio. Strategic decisions can be made through valuation to ensure an extensive and balanced portfolio. Periodic asset assessment and valuation can help investors develop rebalancing strategies.

4 - Financial Health Assessment

Valuation provides insights into a company's financial health and future potential. An investor can maintain a healthy financial condition by assessing gross profit, operating margin, and profitability. Careful valuation makes it easier to understand how efficiently the company generates profits from its operations and manages costs.

5 - Maximising Returns

Accurate valuation enables investors to spot opportunities where the market has mispriced a stock.  Investors can estimate a stock's value through detailed valuation techniques such as discounted cash flow (DCF) analysis and comparable company analysis. When a stock's current market price is significantly lower than its estimated value, it is considered undervalued.

While seeking undervalued opportunities, investors conduct thorough research and due diligence to mitigate risks associated with value traps or fundamental weaknesses that may justify the stock's low valuation.

Conclusion

Since valuation is the core of any investment, it is essential to do it properly. Accurately assessing an asset's value can help you navigate the entire market. Valuation's most common benefits include managing risks, managing portfolios, maximising returns, and making well-informed decisions. 

With the help of NIWS, you can learn about different valuation methods and how to apply them. At NIWS (National Institute of Wall Street), our commitment to financial education excellence ensures that investors have access to comprehensive courses and resources. Through expert-led training in valuation techniques and practical applications, NIWS equips investors with the knowledge and skills necessary to excel in financial markets.

Connect with our stock market experts now to know more. 

Are you a share market enthusiast looking to earn profits from stocks? If yes, you must know accurate stock valuation methods to make the best investment decisions, manage your portfolio, assess risks, and plan strategically! 

Stock valuation determines a stock's intrinsic value to assess whether it is overvalued, undervalued, or reasonably priced. Once identified, there are many opportunities to invest and book profits in underpriced stocks, sell overpriced ones, and hold reasonably priced ones. 

But the question remains: How do you evaluate a stock? In this blog, our experts from NIWS, one of the best stock market institutes in Jaipur, Delhi and Indore, will assist you with the five best stock valuation methods, which even a beginner or a pro stock market enthusiast can grasp to book the most profits!

Let’s get into the details to know it all! 

 

Types of Stock Valuation

Before we get into the details of stock valuation methods, let’s first explore how they are done!  

Absolute

In this method, stock valuation is based on a business's fundamental analysis, which is conducted using information collected through financial statements. These methods focus on a company's underlying financial health and future cash flows, independent of its current market price. 

Relative

Relative stock valuation is a method of comparing financial ratios between similar companies. These methods use valuation multiples from comparable companies to determine whether a stock is reasonably priced.

 

Methods for Accurate Stock Valuation

The top methods for an accurate stock valuation include the following-

 

#1 - Discounted Cash Flow (DCF) Analysis

DCF Analysis is a method for valuing assets using their expected future cash flows. The core of DCF analysis is that the value of money today is worth more than the same amount in the future due to its potential earning capacity.

This analysis is helpful for people or organisations that are considering acquiring a company or buying securities.

Steps in DCF Analysis

The following are the steps which are used for conducting a DCF Analysis-

• Estimating future cash flows, usually of 5-10 years, with the help of the company's current and previous financial statements.
• Determining the discount rate. The discount rate typically used is the company's weighted average cost of capital (WACC), which reflects the average rate of return required by the company's investors.
• Calculating the present value of cash flows.

Advantages and Disadvantages

Some of the strengths of DCF Analysis are-

• DCF analysis emphasises a company's intrinsic value based on its fundamental financial performance, such as cash flow generation, revenue growth, and profitability.
• DCF allows investors to adjust critical assumptions and variables to see how changes impact the valuation.

Weakness of DCF Analysis are-

• One of the main drawbacks of DCF Analysis is it is based on estimates rather than factual numbers.
• Future cash flows depend on various factors, such as market demand, the status of the economy, technology, competition, and unforeseen threats or opportunities. These can only be quantified partially.

 

#2 - Dividend Discount Model (DDM)

DDM is an analysis based on the theory that a company's current price is worth the sum of all its future dividend payments when discounted back to its present value. The dividend discount model (DDM) is a quantitative method for predicting the price of a company's stock based on the theory that its present-day price is worth the sum of all its future dividend payments.

Steps in DDM Calculation

Following are the steps which are used in DDM Calculation -

• Estimating future dividends
• Determining the discount rate
• Calculating the present value of dividends

Advantages and Disadvantages

Some of the strengths of DDM Analysis are-

• DDM directly values the cash returns to shareholders, making it straightforward for dividend-paying stocks.
• It is simple to apply and understand.

Weakness of DDM Analysis are-

• DDM does not apply to companies that do not pay dividends or have irregular dividend policies.
• DDM focuses only on dividends and sometimes may overlook other important factors such as earnings growth, reinvestment opportunities, and market conditions.

 

#3 - Comparable Company Analysis (CCA)

This method is used mainly when valuation using other models is not possible. This model compares the stock's price multiples to a benchmark to determine whether the stock is underpriced or overpriced. Comparable company analysis is the process of comparing companies based on similar metrics to assess their enterprise value.

Steps in CCA

Following are the steps which are used in CCA -

• Selecting comparable companies means choosing companies with similar metrics or organisations in similar industries.
• Collecting financial data from comparable companies.
• Calculating and applying multiples to the target company. Some of the common multiples include-

EBITDA- Enterprise value divided by earnings before interest, taxes, depreciation, etc.

Price to Sales Ratio- Market price per share divided by sales per share.

Advantages and Disadvantages

Some of the strengths of CCA are-

• CCA is market-driven and reflects the market conditions and sentiments.
• This method is easy to understand and straightforward, making it accessible to broader investors.

Weakness of CCA Analysis are-

• It requires an accurate selection of comparables, as any bias while choosing comparable companies can affect the results.
• The comparables are selected based on assumptions that they are comparable, which may or may not be the case.

#4 - Price-to-Book (P/B) Ratio

The P/B ratio measures the market value of a company's stock against its book. This ratio helps evaluate companies with significant tangible assets, such as financial institutions and manufacturing firms.

The formula for P/B Ratio is P/B = Market Price per Share / Book Value per Share where:

• Market Price per Share: The current trading price of the company's stock.
• Book Value per Share is the company's total assets minus its total liabilities divided by the number of outstanding shares.

Advantages and Disadvantages

Some of the strengths of Price the book ratio are-

• It is helpful for asset valuation.
• The price-to-book ratio is easy to use and apply.

Weakness of the P/B Ratio are-

• It may not capture intangible assets such as patents, trademarks, and goodwill,
• The P/B ratio varies widely across different industries, making it less useful for comparing companies in other sectors.

#5 - Price-to-Earnings (P/E) Ratio

The Price-to-Earnings (P/E) ratio is one of the most commonly used methods for valuing a company's stock. It measures the relationship between a company's current share price and earnings per share (EPS).

The formula of P/E Ratio is P/E = Market Price per Share / Earnings per Share (EPS) where:

• Market Price per Share: The current trading price of the company's stock.
• Earnings per Share (EPS): The company's net income divided by the number of outstanding shares.

Advantages and Disadvantages

The advantages of the P/E Ratio are-

• It is simple to apply.
• Different organisations widely recognise it.
• The P/E ratio reflects investor expectations and sentiment about a company's future growth and profitability.

Some of the weaknesses of the P/E Ratio are-

• It can be misleading if earnings are volatile.
• P/E ratios can vary widely between sectors, making it less useful for comparing companies across different industries.
• The P/E ratio does not consider other important factors such as a company's debt levels, cash flow, or asset base.

Conclusion

There is no single evaluation method that fits all situations. But with the help of this blog, you are now well aware of the characteristics of all five valuation methods and their pros and cons. While a valuation method such as DCF helps value assets using their expected future cash flows, a CCA valuation method compares companies with similar companies to get the valuation. 

These methods can be applied in real-world investing and provide a quick and intuitive way to compare valuations. At NIWS, we aim to equip our students with all the stock market-related methodologies, tips, and tricks curated by experts from their experience! 

Want to discuss the details? We are just a call away! Contact our experts now to learn more. 

What Should I Do After The 12th- 2023 Most Lucrative Courses!

The question haunts every 12th grader, “What should I do after 12th?” during their study. Their worry is not unfounded or should not be disregarded as silly. With so many opportunities today, it becomes daunting for students to pick an option right after schooling. In recent years, innumerable career opportunities have opened up in the stock market. It also promises instant profits to investors and traders as the stock market grows with each passing day.

“NIWS” National Institute of Wall Street offers a wide range of courses that can benefit both high school and college graduates. The courses range from the stock market and banking to finance and wealth management. The professionals behind the scenes have 10 to 15 years of experience in domestic and international markets. Their tried, tested, and successful strategies have enabled students to pursue career goals and ambitions.

Why Stock Market After 12th?

 

Owing to the blooming number of possibilities for career advancement in the stock market, you can now ask, “What should I do after the 12th?” with courage. Whether you plan to invest or trade, the first step to understanding the stock market is analyzing which stock to buy first and when.

 

Earning profits is achievable once you have cracked the code and grasped the technique. There is a multitude of indicators which give away the correct time to make your move. However, picking a share market classes in Indore can equip you with an in-depth and comprehensive knowledge of patterns and trends.

This knowledge will enable you to identify stock price movements and prepare you to become a good trader with foolproof knowledge of mid-term, short-term, and long-term trading and investments.

2024 Most Lucrative Courses in the Stock Market:

6 Months Program in Financial Market Management (PFMM)

The question “What should I do after the 12th?” can now be followed up by the answer PFMM, or Program in Financial Market Management, a 6-month stock market course. The program deals with topics based on financial market management. It caters to students interested in embarking on a journey to establish themselves in

• Stock Market Broking Organizations,
• Financial Institutions,
• Depository Businesses,
• Who wishes to pursue a career as a Trader or Investor?

The program covers six modules that deal with

• commodity,
• derivative,
• currency,
• capital,
• options trading strategy,
• fundamental analysis,
• technical analysis.

The banking, Financial Services, and Insurance sectors have recently reached incredible heights. As per the BFSI Sector Skill Council of India (BFSISSC), individuals will have a greater chance of securing jobs in this sector. Findings reveal that the industry will create over 8 million jobs by 2026.

While cash or equity trading takes up significant space in the capital market module of the program, the derivative module incorporates future trading. The currency module elaborates on forex trading, and the commodity module explains bullion trading and training.

The course fee is ₹60,000. The student will be rewarded with six certificates, and the diploma assures 100% job placement in broking houses. After completing the 6-month program, candidates can secure jobs in

• Indian and International broking places,
• Pe Funds,
• Hedge Funds,
• Banks,
• Nbfc,
• Asset Management Companies,
• Kpos.

Students who opt for the course after graduation have more chances than high school graduates regarding placements in reputed organizations. 12th graders can expect jobs in small companies and sub-brokers offices.

NIWS Certified Diploma in Research Analyst

Prophesying and foretelling have been associated with necromancy for too long — but what if you can unearth the science behind predicting market trends for a living and end your unceasing question of “What should I do after 12th”?

The NIWS Certified Diploma in Research Analyst course is a four-month program offered at ₹50,000. Within four months, you can bag the title of a Stock and Commodity Market Research Analyst by learning techniques for distinguishing turning points and trends in the stock market and decoding ways to forecast prices.

Students will also benefit from gaining knowledge to understand graphs to form buy-sell judgements. The course also provides tools that enable students to maintain trading positions and exploit technical analysis for intra-day trading. The study would allow candidates to make capital and avoid losses with intensive training to determine how the price of commodities, equities, and securities are doing and understand prior behavior models.

Students can practice live graphs and software like

• Falcon,
• Meterstick,
• Ticker,
• Meta Trader.

Ideal candidates include those who wish to pursue a career in the financial market. The course is also available to those already working as sub-brokers, dealers, investment consultants, fund managers, and portfolio managers.

Research Analyst SEBI NISM Series XV Certification Module

If you still haven’t found the answer to “What should I do after the 12th,” consider opting for the Research Analyst SEBI NISM Series XV Certification Module. The course duration is one month and is offered at ₹15,000. After a month, you can showcase yourself as a SEBI-certified research advisor or an analyst, enabling you to provide research tips for the benefit of the Indian Financial Market as per SEBI.

By the end of the course, you will have grasped the

• Valuation models of the forex,
• commodity, and stock market and methods to analyze and study growth stocks and value stocks through the ESIC approach.

The course suits those who aspire to become a commodity market or share market advisor and even those who dream of opening a research advisory firm. In addition, a student of this program would also acquire skills to analyze events, news, and data.

Recently, the course has become popular as it is mandatory for conducting research and providing advice in mass media through television, press, SMS, email, and blogs. Those who wish to grow their careers in broking houses, trading and investment professionals, and students who want to establish themselves in the Research and Portfolio Management field can benefit from the program. Those in the final year of their graduation can sign up for the course.

Certificate in Stock & Financial Markets

If you can imagine working in financial service industries, let the question “What should I do after the 12th?” be posed no longer. A Certificate in Stock & Financial Markets will allow you to conduct active trading using specialized software and crewing back-office operations of mutual funds organizations and broking houses. The five-month program is offered at ₹45,000.

It is primarily aimed at those who plan to enhance the system or function as terminal operators or dealers in mutual fund businesses and stock market industry broking. In addition to students, RMS, ARMs, and dealers of mutual funds and broking houses can sign up for the course.

12th-pass students are welcome to join, and college graduates will likely get placement assistance from highly reputed companies.

Final Words

Instead of feeling burdened with finding an answer to “what should I do after 12th,” it’s better to face opportunities with a brave face. It’s time to find out if you have a knack for the stock market or if there is a skilled trader or investor inside you waiting to be unleashed.

The wide range of courses, exceptional learning settings, and experienced educators make NIWS a renowned Stock Market Institute In Jaipur. With their goal of implementing unimpeachable and ethical global market practices, NIWS dreams of establishing control in the Indian Financial market space and making a mark globally.

The polished E-Learning Platform and offline courses facilitated by NIWS have enabled countless students to leave their imprints in the banking and financial sectors.

Go for the best and take the best results home. Book your online demo now to know more.

Post Covid 19, the number of people participating in the stock and investing game has increased drastically. Around 140,000 new investors entered the stock market in 2020. According to CDSL and NSDL, Active accounts rose by 10.4 million by the end of 2020.

During the lockdown, people understood the importance of saving and investing money. As inflation is eating up all their hard-earned savings, investing is no longer fancy but has become necessary for everyone.

However, the main problem is that to invest in the stock market, you need to learn about it first. 

To make your learning and investing process easier, NIWS (National Institute of Wall Street) presents a list of stock market courses that you can enrol in immediately after the 12th. 

Book your Free Online Demo now to know more. 

Here is a compilation of all the technical courses NIWS provides concerning the stock market. Even if you’re studying in your high school or 12th pass out, you can enrol in these lucrative options and immediately start earning profits. 

 

1. NIWS Certified Advanced Level Smart Investment and Trading Professional

Course Description

98% of traders who invest in stock or commodity markets squander their money because they lack training and knowledge. 

This course is designed for Newbies in the STO who want to start in the market.

Here's What Is Kept For You

1. Complete knowledge about the Stock Market,
2. Future and Options,
3. Intraday, Short-term delivery, Swing trade, candlestick, chart patterns, etc.,
4. Investment decisions based on options strategies and fundamental data,
5. Commodities or Currency Market,
6. Risk Management and Trading,
7. Product knowledge and practical applications,
8. Secrets of famous traders, etc.

This course is based on logic, news, and event analysis and emphasizes fundamental data from millions of successful stock market personalities.

Eligibility For This Course - Minimum 12th pass.

Fees for the Course - INR 40,000/-. 

Note: The examination fee for NSE & SEBI certification is separately chargeable.

Duration- 4 Months

Certifications- Program completion certificate from NIWS.

Program Highlights

1. Even after you complete the WhatsApp course, you will receive guidance from expert stock market investors and traders.
2. Skills gained in analysing the Indian and International Stock Market, Fit for trading in futures & options, Commodities, and Forex Market.
3. Support of online video tutorials, or if required personal support
4. Assistance in opening a Demat Account with Free ODIN Software

Career Opportunities

1. You can start your online broking business.
2. You can teach others about the stock market and make a career.
3. CA, CS, or another finance program student.

 

2. NIWS Certified Technical Analyst

Course Description

This course is specially designed for stock market newbies who want to learn technical analysis.

Here's What Is Kept For You

1. Complete technical analysis knowledge
2. A detailed study of the types of charts.
3. Candlestick study.
4. Chart patterns and their study.
5. Gaps and Gaps analysis.
6. Oscillators and indicators.
7. Moving Averages.
8. Various laws and theories of trading.
9. Trading strategies, etc.

Eligibility For This Course

• Minimum 12th pass. 
• The candidate must be a graduate to get an analyst job after the NCFM certification.

Fess For The Course - INR 15,000/-.

Note: The examination fee for NSE & SEBI certification is separately chargeable.

Duration - 1 Month

Certifications- NIWS Technical Analysis Certification.

Program Highlights

1. Techniques for pointing out trends and crucial turning points. 
2. Generating calls in all segments, whether equity, commodity or currency.
3. Recognising the patterns from charts for buy-sell decisions.
4. Guidance from expert traders and investors in the stock market
5. Support of online video tutorials or, if required, personal support.

Career Opportunities

1. NIWS Technical Analysis Certification
2. Support in getting a job as a Technical Analyst or Research Analyst.

 

3. NIWS Certified Options Strategy Professional

Course Description

This course is designed to equip you with the strategies and techniques to become a successful trader in futures and options.

Here's What Is Kept For You

1. Introducing Terminologies of Options
2. Strategies of using calls in different Market Conditions (with Probability)
3. Calculating “Put-Call” Parity
4. Hedging and Arbitrage with options
5. VIX and Probability Distribution Function

Eligibility For This Course - Minimum 12th pass

Fees For This Course - INR 15,000/-. 

Note: The examination fee for NSE & SEBI certification is separately chargeable.

Duration - 1 Month

Certifications- NCFM Options Strategy Certification.

Program Highlights

1. Become a Certified Options Strategy expert.
2. Knowledge to work as an arbitrager or options strategist.
3. Learn to earn profit with less risk in different market conditions.
4. Ability to do trading or arbitrage to hedge the portfolio.

Career Opportunities

1. As a graduate, you can work as an option strategy or arbitrager expert in big finance corporations.

4. NIWS Certified Smart Investment & Trading Professional

Course Description

This course is specifically designed for newcomers to the stock market who are unfamiliar with its intricacies.

Here's What Is Kept For You

1. All tools and rules for trading and investments in the stock market.
2. About Capital Markets.
3. Futures and Options in detail.
4. Commodity and Currency(Forex) Market.
5. Practical exposure of All theories in detail.

Eligibility For This Course - Minimum 10th Pass.

Fees For The Course - INR 10,000/-.

Note: The examination fee for NSE & SEBI certification is separately chargeable.

Duration- One month

Certifications- NIWS Certificate in Smart Investment and Trading Professional.

Program Highlights

Develop a sensible approach to investing & trading.

1. Adding Credibility to your Resume.
2. A Full practical approach to learning.
3. Learn to become a Smart Professional in Investment and Trading.

Career Opportunities

This course will help you become an intelligent professional in investment and trade.

 

5. Technical Analysis Crash Course

Course Description

Once you complete the fundamental analysis, you must conversate with the technical analysis. Without technical analysis, even the experts don't move further. 

This course is for beginners to grasp technical analysis. 

Here's What Is Kept For You

1. Complete knowledge of Technical Analysis.
2. Different CandleStick pattern studies.
3. Different Gaps Analysis.
4. Learning Fibonacci Sequence.
5. Learn to trade on Mako, RSI, balance volume, stochastic, William %R, Money flow index, etc.
6. Various theories like The Dow theory, Elliot waves theory, etc.

Eligibility For This Course

There are no specific eligibility criteria.

Fees For The Course - INR 7500/-.

Note: The examination fee for NSE & SEBI certification is separately chargeable.

Duration - 5 Days

Certifications - NIWS Certified Technical Analysis Crash Course certificate.

Program Highlights

1. Technical Analysis in 2 or 3 days in this short-term program.
2. Small study batches for better focus.
3. Practical approach while learning through EOD soft

Career Opportunities

1. Job as a Technical Analyst or Research Analyst at a significant financial corporation.

 

6. NIWS Harmonic Trading Course

Course Description

Technical Analysis is a non-negotiable before investing or trading in a stock. Harmonic Trading attempts to predict future movements, unlike other standard trading methods.

The Course is for newbies who want to get a grip on Harmonic Trading.

Here's What Is Kept For You

1. Harmonic Trading in detail. 
2. Pattern Identification includes the AB=CD Pattern, Bat Pattern, Gartley Pattern, Crab Patterns, and the Ideal Butterfly Pattern.
3. Advanced Harmonic Patterns.
4. Combining Harmonic Pattern with Traditional Technical Analysis.
5. Advanced Harmonic Trading Execution Strategies, etc.

 

Eligibility For The Course - Minimum 10+2(HSC) passed.

Fees For The Course - INR 60000/-. 

However, you can also pay in instalments.

Note: The examination fee for NSE & SEBI certification is separately chargeable.

Duration - 2 Months

Certifications - Course completion certificate from NIWS.

Program Highlights

1. Help you master generating calls in all segments, whether equity, commodity or currency.
2. Learn the techniques for identifying trends and turning points.
3. Develop Skills in operating or using specialised software for research

Career Opportunities

1. After completing the course, we will assist you in finding a job as a Senior Technical Analyst or Research Analyst at a financial firm.
2. You can apply all the learning and strategies in your investing or trading journey.

Conclusion

The stock market is a sunrise industry. There are no such academic criteria. You only need to pass any HS education (class 12). These certificate courses are designed so that you can gain knowledge and build a flourishing career in this domain.  As data and surveys show, less than 3% of India's total population currently invests in the stock market, and the number will increase.
 

Frequently Asked Questions: 

Q. 1 Which is the best technical course after class 12th?

Ans: If you are interested in the money or stock market, a technical analysis crash course or professional trading course is the best option for your niche.

Q. 2 I am from a science or arts background; how can I build a career in the stock market?

Ans: No matter your background, NIWS share market classes in Indore will help you with all the initial beginner to professional details for easy clarity, learning and lucrative benefits. 

Q. 3 Can I bag a high-paying job after 12th without pursuing further studies?

Ans: You can easily grab your seat for a high-paying job after the 12th with the best Stock Market Institute In Delhi by NIWS. Check out our placement history to know more. 

You must have heard Bull and Bear when discussing the stock market. These are the terms used to define the market—whether it is dipping or going up. By understanding the market's demand and supply dynamics, you, as a trader, can make an informed decision and capitalise on opportunities.

With the help of NIWS, one of the best stock market institutes in Jaipur and Delhi, you can learn the market intricacies and gain insight into the bull and bear sides of the stock markets. Our professionals are not only industry experts but also committed to empowering students and traders with the knowledge and skills necessary to excel in the dynamic financial market.

The purpose of this blog is simple: to provide you with knowledge regarding the dynamics of market demand and supply. Let’s dive in to the details in this blog to explore more. 

Fundamentals of Demand and Supply in Stock Markets

Demand and supply are the two most important aspects of the stock market, which determine the prices of shares and stocks. Demand describes the quantity of stocks you are ready to buy, whereas supply refers to the quantity of stocks you are ready to sell at a price. Only the dependency of demand and supply on each other helps to determine the prices of stocks in the financial market.

Some of the factors that influence demand and supply include-

Economic Indicators 

Economic indicators such as GDP, inflation, and interest rates influence stock prices. If the GDP is strong and consistent, there is an increased demand for stocks. During high inflation, the purchasing power of the general population decreases, resulting in less demand for stocks and vice versa.

Government Policies 

Introducing new policies or any change in the current policy can influence the demand and supply in the stock market. For example, a new bill in parliament promoting Green Energy companies can affect the share price of companies working in this sector.

Characteristics of Bull and Bear Markets

Now that you have learned the basics of demand and supply in stock markets, let's discuss the characteristics of bull and bear markets as well-

Bull Market: 

When the economy is stable and growing, suggesting a favourable rise in market conditions, it is referred to as a Bull Market.

Some of the essential characteristics of this market include-

• Favourable employment growth.
• Prices of financial securities are rising.
• Investors take higher risks.
• Increased economic growth.

Factors that drive a bull market include-

• Strong GDP
• Lower unemployment rate, which increases purchasing power.
• Lower interest rates make borrowing cheaper and encourage investors to invest in stocks.

 

Bear Market:

In a bear market, the market conditions are not favourable, as there is a continuous dip. Share prices in such conditions keep on dropping.

Some of the essential characteristics of this market include-

• Rising unemployment rates.
• Decrease in the value of shares.
• Investors are low on confidence; hence, they take no risks.
• Setback or dip in economic growth

Factors leading to a bear market include-

• There is a decrease in consumer spending power.
• Weak economic indicators include declining GDP or a higher unemployment rate.
• A war or any change in government policies.

 

Demand and Supply Dynamics in Bull Market

The dynamics of demand and supply in a bull market are-

Increased Demand:

During this time, there is an increased demand for shares in the market. Solid economic factors that increase demand include positive government policies, stronger GDP, consistent economic growth, favourable employment rates, investors' positive mindset, and a higher risk-taking attitude.

 Even the fear of missing out on investment opportunities drives investors to buy stocks aggressively, which leads to an increase in the price of the stocks. All these conditions drive the market in a direction where the demand for stocks and shares will increase.

Decreased Supply:

Investors hold onto the shares with the belief the value of the stocks will increase further. In a bullish market, the environment is such that investors usually think of long-term gains.

Often, companies buy back their shares, which reduces the number of stocks available to the general public. This is usually done because the company feels that the market price of its shares is undervalued.

The impact of the buybacks -

• The increased price of the share is due to a lower supply.
• Higher Earnings per Share can make the stock look attractive, increasing the demand for those shares.

 

Demand and Supply Dynamics in Bear Markets

The dynamics of demand and supply in a Bear market are-

Decreased Demand:

• When a country's economic conditions are poor or the GDP is rapidly declining, there are few investment opportunities. There is hardly any demand for stocks in such cases. As the unemployment level increases in such a market, there is little money left for people to invest. 
• Any hostile government policy can also direct the market into such conditions. 
• Negative sentiment and investor panic, which leads them to sell the shares due to the fear of losing money, can lead to a price dip in the stock market.

 

Increased Supply:

• Panic selling by investors is the main reason for the increased supply in bear markets.
• Companies that cannot survive often issue new shares to raise capital, increasing the supply of stocks in the market. 

 

Strategies for Navigating Bull and Bear Markets

Let's discuss the strategy for navigating the market-

For Bull Markets:

1. Trend Following: Investing in stocks that are in news feeds or are talked about or any specific sectors that are performing well.
2. Growth Stocks: This can be done by investing in stocks that have growth potential.
3. Diversification: Maintain a diversified portfolio, i.e., one that is spread across different asset classes and kinds of investments. This spreads risk while capturing broad market gains.
4. Buy and Hold: This is a strategy that helps gain long-term benefits. 

For Bear Markets:

1. Defensive Stocks: In this, you must invest in stocks that will perform well even during economic downfall, such as healthcare, utilities, etc.
2. Asset Allocation: Put in your money or adjust your assets to include more gold, bonds, or anything else considered safe.
3. Stop-Loss Orders: This strategy allows you to limit your losses by automatically selling investments that are not performing well and have fallen below a specific price level.

Common Pitfalls and How to Avoid Them:

Some of the most common mistakes made by the investors include-

• Overconfidence in the bull market. As the market is unpredictable, taking risks you are comfortable with is better than just following everyone blindly.
• Panic selling of shares during a market dip has a negative impact. As an investor, you will bear a lot of loss and lose on the opportunity to recover once the market rises again.
• Following the trend stocks without any research or data to back your investment. In such cases, you are jumping on the trend too late, which means the prices are already high, and when you sell them, the prices will probably be too low. So, conduct proper research before buying any stocks.
• Lack of diversification can wipe out your entire portfolio, so it is advisable to continuously diversify as much as possible to help mitigate the risks.

 

Conclusion

Market cycles are inevitable, and understanding the characteristics of bull and bear markets empowers you as an investor. You can embrace the opportunities presented in both market conditions by adapting to strategies and maintaining a long-term perspective. It is better to always research before jumping onto any investment. Blindly following trending stocks and overconfidence in the bull market can be risky. 

By understanding demand and supply and the factors responsible for driving market dynamics, you can make an informed decision and achieve your financial goals. This blog can help you navigate the market efficiently.
If you wish to learn from professionals, contact NIWS. Our institute is the best stock market institute in Jaipur and Delhi. Our advanced course modules and highly trained professionals can give you industry insights and help you capitalise on stock market opportunities.

In the fast-paced world of trading, having the right tools at your disposal isn't just helpful—it's crucial. These tools provide the backbone for strategic decision-making, offering insights beyond basic market observations to deep, actionable intelligence.

Whether through sophisticated analytical software that forecasts market trends or real-time data feeds that track stock movements, these resources empower traders to act swiftly and precisely. If you’re planning to enter the stock market scenario, you must know these essential tools and resources required for stock market trading.

In this blog, our stock market traders at NIWS will explain these tools and resources, explaining what they are and why they are needed. We at NIWS provide the best stock market courses in Jaipur and Delhi, assisted by expert professionals with years of experience.

Let’s find out more about these tools and resources below!

10 Essential Tools and Services that a Stock Market Trader Must Know

Here’s the list of tools and resources you must know to excel in the stock market!

1. Trading Platforms

Trading platforms are electronic platforms. These are the softwares programs that allow users to place an order for a financial product like- stocks and shares online. It will enable the traders to open, close, and manage the market positions online through the financial intermediary, which is known as an online broker.

These online trading platforms provide tools such as charting, real-time quotes, and news feeds. Some well-known trading platforms include- Groww, Zerodha, and Angel Broking.

1. Charting Software

These softwares allow traders to examine share price data through charts. Charts make it easier to identify the financial market's patterns, trends, and potential reversal points.

This software analyses historical price movements through technical indicators and patterns. Examples include TradingView, MetaTrader, and NinjaTrader.

1. Market Research Tools

The market research tool can be a part of software or a website that provides market insights through fundamental analysis and expert analyses. These tools are important for traders because they can predict market trends. Examples include Bloomberg, Morningstar, and Yahoo Finance.

1. Stock Scanners and Screeners

A stock screener is a tool traders use to choose stocks based on search criteria. This helps traders find stocks that match their investment criteria by filtering through hundreds of stocks based on specified metrics. Examples of stock screeners include Finviz, Trade Ideas, and StockFetcher.

1. News Feeds

News feeds are a real-time source offering the latest market trends, analysis, and news updates. This news usually relates to the stock market and can impact stock prices. With the help of these news feeds, investors or traders can make informed decisions. Examples include Reuters, CNBC, and MarketWatch.

1. Economic Calendars

Traders use this calendar to track important dates and pre-planned events such as economic indicators, policy changes, earnings announcements, etc. They keep it because these events can impact individual security prices or markets. Examples include Forex Factory and Investing.com.

1. Trading Simulators

These online platforms allow traders to practice trading in a simulated market with virtual money. These platforms are replicated to the real market conditions, which means the same price movements, trading rules, and execution orders.

With the help of these trading simulators, a beginner can practice and use his or her skills without risking money.

Examples include paperMoney by TD Ameritrade and Warrior Trading Simulator.

1. Risk Management Tools

Risk management tools in the stock market are sophisticated software and strategies designed to mitigate potential losses. These tools continuously monitor market conditions and utilise algorithms to adjust trades, such as setting stop-loss orders or hedging positions, based on predefined risk levels.

They also feature scenario analysis and stress testing to help traders foresee how their portfolios might perform under various market scenarios, enhancing decision-making and investment protection.

1. Educational Resources

These resources help educate investors and aspiring traders about trading strategies, financial instruments, and market trends. Learning these techniques makes it easier for the trader to initiate a trade.

NIWS offers a wealth of educational resources in its stock market courses, equipping students and learners with all the required trading knowledge.

1. Regulatory and Compliance Information

This refers to information regarding the rules and regulations that help govern trading activities. By staying informed of regulatory information, a trader can ensure that his/her trading practices are completely legal and by the book. The websites of the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) are some examples of this.

Conclusion

Understanding and utilising the right tools and resources is not just beneficial—it's essential for anyone serious about succeeding in the stock market. These tools enable traders to make more precise decisions backed by data and thorough analysis, helping to minimise risks and maximise returns.

At NIWS, we are dedicated to providing top-tier stock market education. Our courses in Jaipur and Delhi are crafted by experienced professionals who bring real-world insights directly to our classrooms.

By enrolling in our online and offline programs, you'll gain access to the critical tools and knowledge needed to navigate the complexities of trading effectively. Join us at NIWS, where your journey toward becoming a proficient stock market trader begins.